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The US-China tech war is only getting started

In what is now almost a routine step, the US added another 12 Chinese companies to its "entity list" last week.

These latest additions include three quantum communications companies (for their role in supporting the military) and New H3C, a JV between HPE and Tsinghua University.

They join a lengthy list that includes IT, AI and electronics manufacturers deemed to have military links. From the telecom sector Huawei and state-owned optical manufacturer Fiberhome are the notable inclusions, although neither ZTE nor any of the telcos have been added.

The telecom operators have been subject to other measures. They were all delisted from the NYSE early this year as part of an investment ban and have been blocked from landing cables or running services.

In what is likely the final exclusion, the FCC has just revoked the licenses of China Telecom, which had the most extensive operations in the US.

Invoking national security, Washington has also refused to allow trans-Pacific cables to directly connect to Hong Kong, forcing the Facebook-invested PLCN project to terminate in Taiwan.

On the vendor side of the fence, the Biden Administration has just signed into law the ban on approvals for Huawei and ZTE equipment.

China's Foreign Ministry spokesperson said the entity list inclusions undermined the international trade order and threatened global supply chains, adding that China "reserves the right to take necessary counter-measures."


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Just as US measures against China's tech sector proliferate, so do China's counter-measures.

One such is China's plan to replace foreign technologies with its own. That is not new in itself – China began pushing "indigenous innovation" as far back as 2009.

But this appears to be accelerating in the face of the current tensions. Bloomberg reported last week that the Chinese government is creating a list of vetted IT suppliers that will exclusively supply sensitive sectors like financial services and data centers.

Already 1,800 Chinese IT hardware, networking and software suppliers have been invited to a key industry panel that will set standards. Inclusion on the committee is limited to companies that are no more than 25% foreign-owned, so big foreign brands such as Apple, Microsoft and Ericsson are excluded.

As Bloomberg points out, this is intended to further speed local champions to self-sufficiency and will give authorities even more leverage over foreign tech firms.

Another tech measure aimed at constraining foreign firms in China is the new Data Security Law, which requires that "national core data" and other yet-to-be-defined categories of data be stored in China and forbids data sharing with foreign authorities without approval.

In a sign of the more challenging environment, Yahoo, Fortnite and Linkedin have all announced they are exiting the China market in the past month.

They will likely not be the last, note two former Hong Kong legislators, Dennis Kwok and Charles Mok, who write that China's main purpose is to manage and control data security that poses a potential threat to national security.

"The fear is that if foreign governments and regulators could obtain access to these data, they could be used against the Chinese state," they said.

— Robert Clark, contributing editor, special to Light Reading

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